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Vision, talent, and drive aren’t the only success factors for a fast-paced startup. Disciplined spending is a must too.
Adopt the five habits below, which build responsible spending, into your company's culture early. Patterns like these will eventually pay off by impressing your investors and accelerating your growth.
1. Define acceptable expenses
Invest some time in building clear employee spending guidelines for travel, entertainment and other purchases. Time spent establishing these rules sends an important message about the company’s commitment to careful spending. It also cuts down on spending misunderstandings, which burn cycles (and patience) to resolve.
Let your team know that you are serious about responsible spending by complying with the guidelines yourself. Update and communicate these rules as needed as your staff or business changes.
2. Issue cards ― with good controls
Teaching employees to pay with business cards can give you more precise control over spending when you set parameters based on job role. Developers, for example, can buy the tools and services they need within approved purchase categories. With salespeople, it typically works best to set spending limits. As your company grows, you can set similar controls for new employees and job roles.
Have any employee you give a business card to sign an agreement acknowledging that they have read your spending guidelines. This agreement should include their obligations and consequences in cases of unauthorized use.
3. Mine data for insights
One big payoff of employees using cards for spending is an abundance of detailed data. Even if you have just a few employees now, you can get into the habit of proactively using this data to understand where company funds are going and to look for opportunities to consolidate and streamline spending. Build reports so you can analyze trends and spot outliers, such as unusual expense categories or spending at odd times or on weekends. Reviewing reports by expense category also allows you to quickly see where budgets might be exceeded.
4. Insist on receipts
Get in the habit of requiring employees to submit documentation — such as a receipt or proof of delivery — that supports an expense claim. To prevent abuse via undocumented cash spending, you might require that business cards be used for even minor expenses ― these days, incidental purchases can be put on plastic almost everywhere. Mandating the use of cards also helps ensure that a merchant credit against a claimed expense, such as a refund for returned merchandise, goes back to the company.
5. Review and approve expenses
Ensuring that all expense reports are reviewed before they’re processed allows you to address out-of-policy spending when it happens. It also lets you grant some flexibility when rules are bent for a good reason. Review your co-founders’ expenses, too — and have them review yours. This helps to reinforce a culture of accountability and sends the right message to your team.
Putting these five good habits in place can feel challenging in a fast-paced, entrepreneurial culture that tends to celebrate disruption over following established practices. But company leaders who are bold enough to adopt solid policies around spending know that in the long run, they are protecting the ability of the business to execute on its vision.